Well now the plans to close dealerships is scrapped too. Car dealers are major campaign donors at the local & state level (see here and here). State laws regulating dealerships tilt very heavily in the dealer's favor and drive up the price of cars.

So now GM is neither renegotiating its Union contracts nor cutting dealerships. In a further politically directed move it is emphasizing building small high-mileage cars - exactly the kind that have the lowest profit margins.

When a company is run by politicians it will be run for the benefit of the most politically powerful. Scaling up doesn't change the equation: the government is proposing a takeover of health care, energy, and education. That is 1/3rd of the economy that will be controlled by politicians for the politically powerful.

Update: Bainbridge has similar thoughts:

This is the problem with the government owning new GM--it's 99.99% certain that the government will not let GM make economically rational decisions that negatively impact politically powerful constituencies.